Our Research in the Media

California’s state government, employers and families are concerned about the affordability of healthcare in California. The Affordable Care Act is likely to have opposing effects on healthcare expenditures. On the one hand, the number uninsured in California is expected to decrease from 6.0 million to 2.6 million between 2011 and 2016, leading to increased expenditures (CalSIM, 2014; Hadley et al., 2008). On the other hand, payment and delivery innovations within the Affordable Care Act and private market have the potential to reduce expenditures (McClellan, 2014), but there is a concern that provider consolidation may lead to higher prices (Health Care Cost Institute, 2014; Baker et al, 2014; Robinson, 2011; Berenson et al., 2010). In this report, we forecast health expenditures in California from 2013–2022 using the Berkeley Forum Healthcare Expenditure Forecasting Model discussed in A New Vision for California’s Healthcare System: Integrated Care with Aligned Financial Incentives (Scheffler et al., 2013).

Then, we disaggregate spending by service type and source of payment. Next, we identify the key factors driving health expenditure growth and discuss each factor’s contribution. Finally, we estimate the progress toward the Berkeley Forum Vision of increasing risk-based payments and integrated care. Our principal data sources include the Centers for Medicare & Medicaid Services’ (CMS) Office of the Actuary’s National Health Expenditure Account historical and forecasted estimates (CMS, 2014a, 2014b, 2011).

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There is new evidence that California’s accountable care organizations (ACOs) are growing in size and number, serving more patients, and improving the quality of care—according to a report released today by the Berkeley Forum for Improving California’s Healthcare Delivery System. California has more ACOs (67) than any other state in the country, with particularly rapid growth over the past two years. The report estimates that, by February 2016, more than 1.3 million Californians will be receiving their care from ACOs. The growth is projected to occur in nearly all regions of the state.

“The next few years are likely to bring continued growth and diversity in accountable care models that move increasingly toward being paid for meeting cost and quality targets,” said Stephen Shortell, lead author of the report and chair of the Berkeley Forum.

ACOs are defined as medical groups that contract with Medicare and/or commercial insurers to care for a defined population of patients and that are held accountable to meet cost and quality criteria. In a 2013 report, Berkeley Forum leaders called for at least 50 percent of Californians to be receiving care under new payment models that encourage keeping people well by 2022; and having at least 60 percent of Californians receiving their care from integrated care systems, versus only 29 percent today.

“California is fortunate to have many integrated healthcare delivery systems at various stages of development. The advancement of these systems into accountable care organizations and partnerships should be viewed as an important and very positive innovation in payment and health care delivery,” said Tom Williams, immediate past-president of the Integrated Healthcare Association and vice president of accountable care operations and strategy at Stanford Health Care.

Emerging evidence suggests that the quality of care that ACOs provide is as good, and on some measures, better than that provided by other models of care. Further, patients receiving care from medical groups with ACO contracts had consistently higher satisfaction scores than patients receiving care from groups without ACO contracts. This included measures of access to care, overall coordination of care, actions to promote health, communication with doctors, helpfulness of office staff, and overall ratings of care. While full cost-savings data are not available, preliminary evidence from an ACO contract in Sacramento found savings of $20 million, with no increase in health insurance premiums for California’s CalPERS enrollees.

The study also addressed the concern that as ACOs grow in size they may exert pressure to increase prices. “But at this point in time, our analysis indicates there is little evidence to support such concern”said Richard Scheffler, report co-author and Vice Chair of the Berkeley Forum.

Based on existing and ongoing study, the UC Berkeley School of Public Health team identified six factors associated with more successful ACOs. These include:

• Achieving sufficient size to spread costs,
• Developing new models of caring for high complex/high risk patients,
• Expanding the use of electronic health records,
• Developing effective partnerships with post-acute care providers and specialists,
• Motivating patients and families to become more engaged in their care, and
• Using standardized and transparent quality of care data for the purposes of public reporting and internal quality improvement.

The report also found that ACO location is positively associated with the number of HMOs in an area, which suggests that ACOs may be a competitive response to HMOs or that the knowledge needed to run a risk-based plan is more available in these areas. Counties with greater hospital concentration were negatively associated with having an ACO in the area and with ACO enrollment.

The report notes the need for continued technical assistance for smaller physician practices, those serving the Medi-Cal population, and those providing care in rural areas. This is particularly true in regard to electronic health record capabilities, and encouraging greater participation in quality improvement training and quality improvement collaborations.

The Berkeley Forum for Improving California’s Healthcare Delivery System is a partnership between private and public sector leaders in California to address the challenge of developing a more affordable and cost-effective healthcare system that will contribute to improved population health for all Californians. The University of California, Berkeley School of Public Health serves as a neutral facilitator for discussions and as the analytic staff for this effort. 

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A report released November 19 by the Berkeley Forum finds that California hospital spending could be reduced by billions of dollars over the next eight years if patients’ wishes about palliative care were honored. The Forum—a collaborative effort involving executive leadership of major health insurers, health care delivery systems and the State of California with health policy experts from the School of Public Health at UC-Berkeley—previously issued a Vision of increased choice and better value for patients nearing end of life. The new report builds on that Vision, highlighting three major programs that give patients in California greater choice of care outside the hospital. The programs’ interdisciplinary teams incorporate patient goals and wishes when planning treatment, resulting in patient-centered care that tends to move people out of intensive hospital settings and into care in the community.

“Our review shows that offering more choices to patients can not only increase satisfaction with care and improve outcomes, but also divert spending from expensive and unwanted services,” said Eric Kessell, policy director for the Berkeley Forum and lead author on the report.

The study also found that by expanding access to community-based palliative care to over 100,000 Californians a year through 2022, more than $5.5 billion could be moved from high-cost, unwanted hospital services while honoring patient wishes for care at home and in other community settings.

“The wishes of patients, their families and loved ones should be honored at the end of life,” said Richard Scheffler, co-chair of the Berkeley Forum. “Many of them do not want to die in a hospital. This report gives them other choices.”

In order to achieve this Vision, conversations about palliative care will need to be incorporated throughout the healthcare delivery system, with increased use of nurse practitioners and other healthcare professionals, and a tripling of physicians certified in hospice and palliative medicine.

Stephen Shortell, chair of the Berkeley Forum, said, “The increased interest in palliative care is part of a larger movement toward greater patient and family engagement in all aspects of their care over the life course.”

“Expanding palliative care in California is the right thing to do on every level. It is what patients want, it improves outcomes, it lowers costs and most importantly provides compassionate relief to those suffering.”

— David Feinberg, president and CEO of the UCLA Health System and UC Health’s representative on The Forum

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Related information: http://berkeleyhealthcareforum.berkeley.edu

Contact information
Prof. Richard Scheffler: 510-643-4100
Eric Kessell: [email protected]